Kajaria Ceramics’ (KJC) 4QFY25 EBITDA was below our estimate due to lowerthan-estimated realization and higher-than-estimated other expenses. EBITDA (including discontinued operation) declined ~28% YoY to INR1.7b (~28% miss) and OPM contracted 3.8pp YoY to ~10% (est. ~13%). PAT (incl. discontinued operations) declined ~39% YoY to INR943m (33% miss). Management highlighted that demand was soft in both domestic and exports in 4QFY25. Margin contraction was due to another muted quarter for the Bathware division and a write-off in UK operations (INR70m). It refrained from giving any guidance for FY26 and indicated that it would wait for one more quarter to see a recovery in demand. Further, it is exploring certain measures, including cost optimization, brand strengthening, and reach enhancement, to become more competitive and improve margins.
OutlookWe cut our EPS estimates by ~11%/10% for FY26/FY27 to factor in persistently weak domestic demand and increased competition from Morbi players due to weak exports (down ~20% YoY in FY25). This also led to margin pressure. We value KJC at 35x FY27E EPS to arrive at our revised TP of INR950 (earlier INR1,020). Maintain BUY.
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